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What if Tesla does not survive?

What if Tesla does not survive?

I hate to ever even ask but what happens if Tesla as a company doesn't survive? Is there some protection we have as buyers that will offer service/warrany/repairs for some time in the future?

Brian H |
26 janvier 2013

No.

I don't know.

Pick one.

You could ask the same about GM or any car company. Despite the bailout, GM continues to wobble.

Jewsh |
26 janvier 2013

At this point if you buy a Tesla you're taking a huge chance. If you are squeamish about losing 100K, maybe this isn't for you. :-)

Timo |
27 janvier 2013

I don't think it is "huge chance". Elon said they would be profitable after 8000 cars sold and reservation list is far longer than that. I would say that there is a risk, but not huge one.

OTOH, like Jewsh said, if $100k is enormous, house ruining risk to you I wouldn't gamble on that. It's like playing russian roulette with a revolver with 1000 chambers in it. Only 1/1000 chance to get killed, but if that happens it is game over.

Brian H |
27 janvier 2013

Timo;
8K/annum, I think. "Profitable" is always a period-related measure. And "sold" means delivered for Tesla.

Benz |
27 janvier 2013

It does not look like if Tesla Motors would not survive as a car company. On the contrary actually. Tesla is doing good business now. Reservations for the Model S are coming in every day.

But say six month's ago there were not that many reservations. Maybe that was the moment to ask such a question, but now things are going upwards only. And that's great.

I even think that Tesla Motors has set a standerd (Model S) which will not be reached by other car companies in a few years time. Tesla Motors has become a leader in the segment of Electric Vehicles. And this segment is going to grow substantially in the coming years. The numbers of Electric Vehicles that are going to be sold will start growing year by year.

Jewsh |
27 janvier 2013

For the record I think Tesla has done very well so far. It is important to be objective though and therefore to realize even great companies with awesome ideas can go under.

Edneff |
27 janvier 2013

If TM faces a crisis, they would reorganize under the same ownership, if that did not work, they would declare Ch7 and I believe new investors would pick up the assets and start over.

In any event, there is enough value here that I just can't believe that it will go away.

Look at Eclipse Jet.

Benz |
27 janvier 2013

@Jewsh
Good point.
But in case of Tesla Motors, if something like that would happen, then that would be caused by external entities, not by Tesla Motors itself. Because Tesla Motors itself has great potential.

Talking about external entities. Who could that external entity be? I can think of only 1. And that is the oil industry. Because Electric Vehicles do not need petrol or diesel. The oil industry already has "killed" the EV1 less then 10 years ago. The question is: "Can the oil industry do something to stop the succes of Electric Vehicles?".

Jewsh |
27 janvier 2013

I'm interested to see whether Mercedes would buy Tesla, regardless of their financial status. To date I believe they've been the most major investor.

Benz |
27 janvier 2013

@Jewsh
I am a great fan of German cars, but would I like it if Daimler (Mercedes) one day would decide to buy Tesla Motors? I think that I would prefer it if Tesla Motors would not be taken over by any company at all. Because I want all the other car companies to be in a position in which they will have to compete with Tesla Motors. Because that is the best way for themselves to manufacture good Electric Vehicles. Because then, these other car companies will have a certain standard (the Tesla cars) which they will have to improve, like a target.

A take-over of Tesla Motors would be a great strategic move by Daimler. And it surely would improve the company value of Daimler. If a take-over of Tesla Motors is anyhow going to happen one day, then I surely hope that it will be realised by Daimler, and not by any other (car) company. Because Daimler is a car company that manufactures high quality cars itself.

NumberOne |
27 janvier 2013

Tesla has management has stated that the future of the company does not depend on manufacturing cars alone. They have supply contracts with Toyota and Mercedes for both battery packs and powertrains. They are very unlikely to be going away, and service for their cars will continue to be available regardles of whether they continue production.

NumberOne |
27 janvier 2013

Extra has in there. Oops.

Brian H |
27 janvier 2013

I think Daimler has "first refusal" in the event of ownership control being sold. But Elon and associates are unlikely to cede control until the market (suppliers) has "caught up and caught on". Take Elon's goals seriously. He is not blowing hot air like most staters of "missions".

Joyrider |
27 janvier 2013

On the comment that the oil industry might be Tesla's biggest enemy and therefore problem: I wouldn't be surprised to hear that some far-sighted oil executive woke one morning with this realization. Putting a couple of fast EV charging stations at his gas stations around the country where there are min-marts and such would be a very good business move.

He would make money by charging for the charge, make money by more people stopping at his mini-marts for a longer period of time, and be on his way to changing his company over to supplying the car energy of the future.

Moral of the story "biggest enemy becomes biggest friend."

danielccc |
27 janvier 2013

If Tesla does not survive you can forget Warranty coverage for sure.

That said the car will continue to be supported by one or more companies which will spring up to cater to the market of whatever number of thousands of Model S owners are out there. They would pick up Tesla's stash of spare parts, procure more parts as needed from suppliers, and so on.

Battery packs can be rebuilt from new cells that Panasonic will still manufacture.

So the cars would keep running pretty much indefinitely.

All that said, I don't see Tesla failing any time soon. Elon isn't into failure, and Space X is making money.

So capital should be available. This means that a scenario of stock dilution would be the first firewall against the company shutting down. But that would not be a problem for car owners, only for shareholders. And, right now, even that doesn't look like a likely near term possibility.

I would not worry about continuity at all. If anything, a collapse would make the Model S a valued collector's item, like a Tucker or DeLorean. There is simply no chance the car will become worthless.

kkiri7 |
27 janvier 2013

I concur with Danielc3,

IF they do go under, you still have your car - you are not "out" of 100k. - you have the prettiest, most aerodynamic, top performance all-electric vehicle that is truly a Joy to drive.

There ARE risks, but Elon's money, his healthy ego and Space X profits will try their best to prevent any failure.

And, yes, small outfits will also pop up to service the "rich boys" toys.

So "have no fear, Elon is here"

If the purchase won't break the bank, do go for it, but if it does, then as some have said, it may be wiser to wait.

Good luck.

Benz |
28 janvier 2013

@Joyrider
Wishful thinking?

The Oil Industry will never turn electric. They hate everything that can be treated as a substitute to each of their oil products. They will do everything to limit the sales of EV's. Worse, they would actually prefer to take all the EV's off the roads. The Oil Industry wants us to remain addicted to their oil. They will not stop producing barrels of oil, until every drop of oil has been taken away from the earth and put in a barrel.

We should be thankful that Barack Obama is the current President of the USA, and not someone like George W. Bush. Politics can be real mean and leathel. Therefore, I hope for Tesla Motors that the next President of the USA will also be friendly towards EV's.

RNB |
28 janvier 2013

They won't survive! It is only a matter of when. Does it look like the near future? Not to me. And I am not investing for 100 years from now, just the next 5, 10, or 20 years.

Benz |
28 janvier 2013

@RNB
You are not very clear in your communication, I must say.

It would be wise if you would add some arguments for your statement. You just say that they won't survive and that it is only a matter of when. If you want to say something, then try to be more specific. We cannot look into your mind, you see. But we do want to know what your thoughts are, and what arguments you have. We just might learn something from you, that we don't know about already. Maybe you have some information that we do not have. It's possible, but you have to tell us first about it. Before we can discuss about it.

Brian H |
28 janvier 2013

RNB is a present or future short-seller. He will suffer the consequences. :)

David70 |
28 janvier 2013

Doesn't look that way to me Brian. If he sells in 10 or 20 years he may be well ahead. Probably nobody wants to hold for 100 years. I know I'm not going to be around that long.

Brian H |
28 janvier 2013

That makes no sense in short-selling. You sell at today's price to be settled at a future date, in hopes of picking up the shares required at a lower price then. Not going to happen.

Pungoteague_Dave |
28 janvier 2013

@joyrider: The oil companies do not own gas stations in the US. They brand and franchise them. The operators are small mostly businesses or regional chains. The oidl companies therefor do not benefit from ancillary sales and cannot make money from EV charging. The actual station operators could do so, but only IF their agreements with the brand providers allow it. For example, no McDonalds owner can change their individual menus without approval from corporate, even though McDonalds does not generally own their stores. This is how the brand mantains its identity and uniformity across all of its store owners.

There are some uninformed Tesla fanboy comments in this thread. I am also a huge fan and will take delivery in a few days. HOWEVER, this is NOT a real car company in terms of profitability and cash flow analysis. In Elon's wildest dreams, Tesla will never independently deliver enough cars in a year to compare with even the smallest major auto brands. The smallest competitors, like Jaguar and Volvo, currently sell many multiples of the TARGET sales for TM. Last year Volvo sold 449,000 cars at prices averaging half what a Model S costs now. TM can only dream of that volume.

Those of us who love our Teslas need to be realistic - we have an almost custom product that we expect to work as well as an Apple iPod, but with development costs spread over a few thousand cars per month (best case), compared to many millions of every Apple product sold every month. Based on this forum's postings, we seem to expect features with costs that so far are spread across a few thousand cars that have been delivered, and maybe 20,000 vehicles this year. Even if those volumes double every year, we are still talking ridiculously low numbers of products being delivered compared to the highly complex technology and development investment when related to any other major consumer product (like a gaming device, laptop, tablet or cell phone).

A car is far more complex than a laptop, yet every laptop requires updates and regular support. We all hope that TM will be around, but it is NOT comparable to any other auto manufacturer in terms of survivability and financial prospects. Elon continues to say that the next six months will be dicey. We should beleive him.

I put my money down, but only with the full expectation to be orphaned in the next couple years. Any other expectation is unrealistic - a psychological mind game that some must play to rationalize their purchase decision. If you can't afford to see this car as a contribution to the next generation, and a potential write-off, you probably should look elsewhere for transportation. The hard numbers are not so pleasant - this company is still a big gamble. The survival odds are a lot worse than the 1,000 to 1 Russian roulette example given above. The vast majority of new businesses fail. I say this as a nationwide retail landlord... we expect all new tenants (especially restaurants) to fail within 5 years and are pleasantly surprised when one survives longer than that. With that said, no one will be happier than me if Tesla is the exception. But an exception is what it would be.

My bet is that at some point Elon will cash in his chips like he did with PayPal, and sell TM to one of the major auto manufacturers that can spread development costs more widely. Daimler Benz would be logical and my preference, but Toyota is also a good candidate. Such a move would professionalize the TM world and smooth off some of the burrs that us early adopters are experiencing.

Pungoteague_Dave |
28 janvier 2013

BTW, I am short against the box, not betting against TM, but hedged for now.

Timo |
28 janvier 2013

Maybe RNB means oil industry with the comment of not survival. It it right under Benz message that talks about oil industry.

jk2014 |
28 janvier 2013

Pungoteague_Dave -- Elon has expressed this week his desire to keep Tesla in the family (like Ford) so a sale is highly unlikely. Remember, his graduate studies were focused on energy storage for electric vehicles, so he will not treat his interest in Tesla the same way he did Paypal. Space X, Tesla, and Solarcity are exactly where he wants to be for a very long time, potentially till the end, so his strategy will take a committed approach. Tesla has a five million square foot factory that is currently working at a fraction of capacity (20K/year). Model S has a wait list well over 20K right now, basically sold out through 2013. The momentum from 2013, will spill into 2014 like a word of mouth block buster and keep demand high and keep production rates growing and money coming in. With expansion of service centers and superchargers across the country by the end of this year, the ground work is being laid for the higher volume geniii vehicle. Elon has also stated he wants a small window of time to learn how to sustain Model S and X levels before taking on geniii, so the mindset is in the right place for long term success. GenIII is expected to produce near 400K/year alone in 4-5 years. The environmental issues are not going away, nor will the gas prices, so Tesla will become even more compelling over this period. They are the only relevant automobile company that is solely electric, they are the only company that has spent the time developing and executing a long range battery solution as they have. No other auto company can come close to the range. They have a competitive advantage that will take years to chip away.

I also think you are mistaken about the average early adopter of a Tesla. I think most damn well do expect Tesla to be a sustainable company in the auto industry...

Benz |
29 janvier 2013

@Pungoteague_Dave
It's always good to have somebody in the group who is keeping his feet on the ground. Your view sounds very realistic to me. But still I hope that no other car company will ever take over Tesla Motors. I would not like that to happen. Therefore, I hope that what jk2014 is saying will come true. Time will tell.

RNB |
29 janvier 2013

I own stock and call options, have for years. I am not hedged, not short.

All companies cease to exist at some point, so yes they will not survive. I do not think tesla will go under soon, will take a long time.

Who knows, there might be a better slingshot technology being developed that will decrease need for ecars...or perhaps the mars colony will be vertically developed and we all use elevators...

Benz |
29 janvier 2013

@RNB
Well, let's hope that Tesla Motors is the exception to your theory, and that Tesla Motors will not cease to exist (at least not in this century).

Brian H |
29 janvier 2013

P_D;
Most of the R&D spent by the majors is to solve problems TM doesn't have. (Engine, transmission). Aside from the E-drivetrain and touchscreen, most of the rest is "fungible" shared knowledge. TM's money and talent has gone to exactly the right places: its core unique "dimensions that matter", in Elon's words.

It is worth watching for ownership developments; Elon has speculated about forming a holding company to control TM and SC and/or SpaceX. That would shield TM from hostile takeover.

Benz |
29 janvier 2013

@Brian H
"Elon has speculated about forming a holding company to control TM and SC and/or SpaceX. That would shield TM from hostile takeover."

Yes, good plan. Eventually somebody (the bad guys: oil/ICE) will try to stop Tesla Motors. Security and protection is required.

kwanta |
28 mai 2013

Elon Musk is the Da Vinci of the 21st century. Not to mention my idol! He even accepted me on Google+ yesterday. I don't know how he manages two companies with 5 kids and no wife. He must be one pretty awesome dad and a hell of a CEO. My hat is off to him!

Elon was the first to revolutionize online payments transfers on the internet at a large scale (PayPal), he founded the first commercial rocket launch company, SpaceX, which revolutionized space travel and beat Orbital, a 30 year old space company, to the International Space Station, funded the greatest energy company to date by using the sun (Solar City). And last but not least, Elon plans to capitalize and improve Daryl Oster's idea of Evacuated Tube Transport on www.et3.com to create faster and cheaper ways to transport people on earth, that being the "Hyperloop". They both may have come up with the idea, but I think Elon's net worth can make it happen.

I agree that TM has had a decade of revenue losses, but once the generation III comes out, their line of cars will be unstoppable with 2.5 million cars being manufactured in 5 years. I realize that during the last election, they were called "Losers". That name was given based on statistics. The major auto manufacturers see losses when manufacturing electric cars. Mostly because it cost too much to have their parts manufacturered for them. Many of the larger auto manufacturers continue to keep engineering them because of the government. That is likely to change. TM makes 70% of their parts in house. This is the same strategy SpaceX and many other profitable companies stay alive. It's a genious methodology, and it works! If outside companies made all your parts, they just increase the price of the parts to make up for errors. If they're built in house, you either fix them or you fail. It's as simple as that. TM has several hundred patents, and have won the 2013 car of the year award. So not too shabby. Fisker made some bad moves, and didn't build much in house, so they went down quickly. Elon is taking out loans from other places, and TM is selling lots of ZEV credits as stock to stay alive, at least for now. But they have to considering the cost of R&D, expenses for labor, and other factors for a start up in a multi-billion dollar industry. But the cost to make their electric cars are far cheaper than making most cars in our auto industry because there are far less mechanical parts that can fail in a car with hundres of less moving parts that don't need oil to keep them functioning.

I totally agree that TM and Solar City need some protection against the oil industry. The third largest oil supplier, Abu Dhabi-based Aabar Investments, bought 4% of Tesla shares (40% of Daimler's shares). I have seen too many other "green" companies fail because of the oil companies buying patents or lobbying to change laws that don't promote a green planet. Oil is essential for many things (like plastics and to grease mechanical parts), but not to kill our planet from combustion engines.

Elon has pretty awesome DNA. I hope his kids continue his success in years to come so I can watch them from heaven after I pass on. I hope Elon's SpaceX teams up with Google and some of the Google X Lab experiments they're doing (with Ray Kurzweil as Google Engineer) and create artificial intelligence that will carry the DNA of humans cryogenically and have the AI fly Elon's Falcon Heavy to other galaxies to keep exploring, and keep humans alive forever. Although the first step is getting to Mars and colonizing life there and to start to terriform the planet.

TeslaRocks |
30 mai 2013

Yeah I can imagine the oil people pacing and scratching their heads, wondering how to shut this thing down or stunt its growth. With GM and the others, it was easy, as they were braindead puppet CEO companies with not so highly concentrated share ownership so they could just buy a bunch of shares, perhaps covertly through family and friends or obscure companies, and control them that way. Or maybe even just indirectly could have done the trick. But with Elon and his bunch of merry but now impatient followers, they have no influence, no way in because Elon et al own most of the shares. This is indeed their worst nightmare as the rebellion is gathering and gaining strength. It will still take some time, which is their only consolation.

I'm surprised Elon added you on Google+, kwanta. I'm surprised he even has time to be on that. Are you sure it was the real him. To be honest, I've been trying to establish contact with him, if he'd have a few minutes to spare so I can share an idea or two. That's why I joined Twitter, although I'm not one for social media. My current idea for him is an inflatable space ship, but I've decided to work out the details before I try to share again.

4humanity |
30 mai 2013

ummm where have you guys been? Don't want to burst your bubble but, the oil guys already slowed this down by more than 20 years.

There was a working Electric car in 1996 that was killed and we are all still paying for it.

Do you think GM just decided to stop making Hummers because they couldn't afford to make them? After a credit boom and solid numbers? not likely. More like they were told 9 miles to the gallon it was unacceptable and they realized they already destroyed their saving grace with a bunch of side deals.

They couldn't just start building it again. So they've done the next best thing. Put gas motors beside electrics. It's a compromise right?

If it wasn't for Elon, the EV most likely would not have been reborn and we'd be stuck with a bunch of electric/gas hybrids and all the other half assed band-aids they are still attempting.

Tesla will survive, but there will still be much more chaos. Sadly as it never even had to be this bad.

Tesla-Mag |
31 mai 2013

Tesla has a great Leader, so to my mind only an external problem like a war or a mega crisis can kill Tesla. As you know Tesla will have to spend lot of money in Supercharger but it's necessary.

Be confident, Tesla will write the electric market.

Tesla-mag.com

Brian H |
31 mai 2013

Tesla-Mag;
Actually, Superchargers, even the whole network, are quite cheap. They are a long-term marketing expense, much less expensive than advertising, and much more effective.

lph |
1 juin 2013

If Tesla has allocated $1000 per car sale to the super charger network (we know they charge $2k for the option with the 60kW MS) and I don't believe that the hardware costs anything like that much to make, $1K tops IMO.
This year Tesla is to sell at least 20k units and the following two years say conservatively 50k (25k each year) you would have 20k + 50k=70k units x $1k=$70m by the end of 2015. Divide that by 300k for stated cost of each station and you get 233 stations! That seems to be about what the 2015 map has.
Also I understand (someone please verify) there are no net running costs for these stations for Tesla after they are up and running.

Piece of cake. Tesla can't loose over that.

lph |
1 juin 2013

Although I don't particularly like the idea from an convenience stand point. If Tesla ever does offer their stations to the general public they could charge a hefty fee for the fast charge and make a further killing.

Brian H |
1 juin 2013

lph;
There is software and "tuning", individual to each car, much of which involves expert staff time. Do you have any idea what significant options cost from other manufacturers? Your attempt to parse the pennies Tesla charges is nonsense.

As for "making a further killing", that betrays a complete lack of understanding of the Supercharger project. It is infrastructure, to make the Model S and its descendants more attractive and useful. It, like the Service Centers, is NOT a profit center.

Vawlkus |
3 juin 2013

Besides, any other car would have to engineered to meet the standard that Tesla created for the superchargers. I can't see many other manufacturers being eager to do that........ for now anyway.